How foreign aid could hurt Tunisia’s transition to democracy

A man looks at a banner during celebrations of the second anniversary of the Tunisian revolution at Avenue Habib-Bourguiba in Tunis on Jan. 13, 2013. (Anis Mili/Reuters)

ByRobert Kubinec

December 19, 2016

Tunisia will soon become one of the world’s largest recipients of foreign aid. But this influx of foreign money could drown out demand for the kind of structural changes that are necessary to keep this fledgling democracy from yet more political instability.

Generous aid to Tunisia typically assumes that external assistance can improve the country’s economy, dampen unrest and ensure democratic consolidation. But unless aid is carefully targeted, it will only serve to inflate the political prospects of the governing coalition without requiring it to commit to real reform.

Tunisia’s economic crisis is not solely due to lack of funds: It is a political problem and will require a political solution. Some aid, such as projects supporting the increasingly assertive civil society, has already had a beneficial effect on improving government transparency and social political awareness. But aid that is not carefully programmed to benefit the broader public instead of merely legitimizing the ruling coalition often backfires. Decades of research in political science and economics has found that the ability of foreign assistance to promote economic growth crucially depends on the transparency of government institutions. Recently, scholars utilizing new, comprehensive data on foreign aid have shown that assistance tends to “amplify” existing political institutions and make them resistant to change, whether for good or ill.

Counterproductive trends with regard to corruption seem to be unfolding in Tunisia, undermining the intentions behind assistance. Favoritism toward powerful elite families has been an endemic, crippling problem since the days of the former president Zine el-Abedine Ben Ali. The extent of this corruption was revealed in a scathing report from the World Bank in 2014, which found that, “heavily regulated market access has also created opportunities for rents extraction by cronies who receive privileged access to certain lucrative activities.” In a recent survey of Tunisian firms, 36 percent of managers said that corruption was a “major constraint” to doing business, and 32 percent said that they would have to give “gifts” if their firms were to compete for government contracts. My field research in Tunisia this past year found that powerful conglomerates tended to control access to lucrative contracts for supplies to state-owned enterprises, which kept smaller firms from being able to compete. Considering that Tunisia’s largest companies are state-owned, this bias is a serious problem.

Legislators have had ample opportunities to propose policy reforms to combat corruption. But little progress has been made. One ambitious effort at overhauling Tunisia’s antiquated investment law took more than two years and finally passed last month in a watered-down version with doubtful prospects for ameliorating economic growth. The parliament established an anti-corruption watchdog headed by a firebrand lawyer, who has since announced his intention to prosecute both public officials and businesspeople. However, despite its willingness to bring the subject to open debate, the agency has yet to prosecute anyone other than minor government officials on accusations of petty corruption. These poor results are in part because, for further action, the agency can only refer cases to the courts, which are accused of abetting corrupt businesspeople.

Since taking power in 2014, governing party Nidaa Tounes has proved remarkably ineffective at implementing reforms aimed at increasing economic growth by opening markets to competition and investment. It has not taken measures designed to increase transparency and fighting corruption. Instead, it has promoted a controversial“economic reconciliation” law that would grant amnesty to all business elites who engaged in shady deals with the old regime.

This lack of transparency can undermine the integrity of the newly democratic electoral system. My recent interviews with Tunisian government and party officials suggest that the campaign-finance system is essentially broken. Observers have been unable to determine how much money was spent in the previous election cycle. Only one party, Afek Tounes, has released any information about its sources of finance. This lack of data is particularly troubling after the 2014 elections, which witnessed a remarkable outpouring of election funds and accusations of foreign funding and corruption among major parties.

Tunisia’s democratic consolidation does need significant external economic assistance. But uncritical support of the current government that does not condition assistance on anti-corruption and transparency measures will undermine political opposition and communicate to the Tunisian public that the status quo is here to stay. Aid without such conditions would undercut any urgency for the governing coalition to tackle difficult projects, granting it the ability to claim credit for aid even as it stalls on concrete reforms. What Tunisia needs is for a new counter-coalition around reform to emerge, one that unites youths disenchanted with policy deadlock, small-business owners, entrepreneurs and professionals whose interest lies in further government transparency and economic innovation.

To bring stability to this new democracy, Tunisia’s political elites must engage in deep structural change to dismantle the prominent networks of crony capitalists obstructing economic development. Absent these kinds of political reconfigurations, Tunisia’s democratic future remains in doubt.

Robert Kubinec is a PhD candidate in comparative political science at the University of Virginia. His research in Egypt, Tunisia and Algeria examines the causes and consequences of business political action within transitional democracies and entrenched autocracies.